Cavendish merger lifts JK Tyre shares to 52-week high; Emkay retains 'Buy'

Emkay believes JK Tyre is entering a phase of accelerating revenue growth, supported by margin expansion, balance-sheet deleveraging, premiumisation, and a favourable commercial vehicle (CV) cycle

Shares of tyre and rubber products maker JK Tyre & Industries were in high demand on the bourses on Tuesday, December 23, after the company announced an update on the merger of its subsidiary, Cavendish Industries. Following the announcement, the company’s shares rose 4.06 per cent to hit a fresh 52-week high of ₹510.85 on the NSE during intraday trade.

 

The counter continued to witness robust investor interest. As of 10:02 AM, JK Tyre shares were trading at ₹509 apiece, up 3.79 per cent from the previous close of ₹490.90 on the NSE. A combined total of 1.27 million equity shares of JK Tyre, valued at around ₹66.30 crore, had changed hands on the BSE and NSE so far in the session.

JK Tyre announces merger update

JK Tyre & Industries informed the exchanges that Cavendish Industries, a subsidiary of the company, has been amalgamated and dissolved without being wound up, with effect from December 22, 2025. Earlier, on November 20, the company had disclosed that the National Company Law Tribunal (NCLT) had sanctioned the Scheme of Amalgamation of Cavendish Industries with JK Tyre & Industries and their respective shareholders.

 

Subsequently, JK Tyre filed the certified copy of the NCLT order with the Registrar of Companies, Jaipur, following which the scheme became effective from December 22, 2025, and operative from the appointed date of April 1, 2025. “Pursuant to the Scheme, the authorised share capital of the transferor company stands combined with the authorised share capital of the company, resulting in an increase in the authorised share capital of the company,” JK Tyre said in an exchange filing.  CATCH STOCK MARKET LIVE UPDATES TODAY

Emkay bullish on JK Tyre; retains 'Buy' rating

Brokerage firm Emkay Global Financial Services has reiterated its ‘Buy’ rating on JK Tyre, maintaining an optimistic outlook for the company. Chirag Jain, deputy head of research at Emkay, believes that JK Tyre is entering a phase of accelerating revenue growth, driven by factors such as margin expansion, balance-sheet deleveraging, premiumisation, and a favourable commercial vehicle (CV) cycle.

 

Emkay expects JK Tyre to surpass its previous peak performance between FY26E and FY28E, supported by a disciplined capital expenditure strategy. The brokerage firm also sees operational synergies from the Cavendish merger, particularly in the Passenger Car Radial (PCR) segment, which enhances the company's competitive positioning.

 

"The Cavendish merger offers operational synergies in PCR, thus improving competitive positioning. Despite such improvements and growth prospects, JK Tyre trades at a 36 per cent discount to players like CEAT on a 1-year forward P/E basis (9 per cent on a 1-year forward EV/Sales basis), making it a compelling buy at current levels (trades at 9.5x Dec-27E P/E)," said the brokerage in its report.

 

The brokerage has raised its target price by 9 per cent to ₹625 (from ₹575) on a 12x Dec-27E P/E, while building in FY25-28E revenue/Ebitda/EPS CAGR of 11 per cent/22 per cent/41 per cent with 8.6 per cent FCF yield.

 

Emkay has also highlighted the acceleration in JK Tyre’s revenue growth in recent quarters, as well as a 220-basis-point increase in its EBIT market share to 21 per cent. This growth has been fueled by factors such as strong demand due to GST cuts, higher PCR penetration, stable raw material prices, and shorter replacement cycles. The company’s 10-year revenue growth ambition is on track, supported by premiumisation trends.  “The premiumisation trend is also visible (PCR now 32 per cent of revenue vs 26 per cent 3 years ago), with >16” tyre share rising to 26 per cent of PCR volume in FY25 (FY20: 20 per cent; 40-45 per cent medium-term target),” Emkay noted.

 

According to brokerage, JK Tyre is currently executing a ₹1,400 crore capex program, with ₹1,030 crore allocated to PCR, ₹260 crore to Truck and Bus Radial (TBR) tyres, and ₹110 crore to Allied Specialty Tyres (ASLTR). The company is also working on a larger ₹5,000 crore medium-term capex plan, with 60 per cent of this investment directed toward expanding its PCR capacity. The first capacities from this expansion are expected to come online by Q3, leading to a 15 per cent uplift in PCR capacity.

 

Emkay’s report also notes that JK Tyre’s strong cash generation, projected at ₹7,660 crore Ebitda over FY26-28E, will help fund most of the ongoing capex. The company’s net debt-to-equity ratio is expected to improve to 0.4x by FY28E, down from 0.9x in FY25 and a peak of 2.9x in FY19. 

 

“JK Tyre’s strong cash generation (₹7,660 crore Ebitda over FY26-28E) would help fund most of the capex, with net D/E at 0.4x by FY28E (FY25: 0.9x; peak: 2.9x in FY19),” said the brokerage.

 

(Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)